Option Investor
Newsletter

Daily Newsletter, Sunday, 11/18/2012

Table of Contents

  1. Leaps Trader Commentary
  2. Portfolio
  3. New Plays
  4. Play Updates
  5. Watch

Leaps Trader Commentary

Time For A Bounce?

by James Brown

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The stock market's post-election sell-off continues with fears running high over Washington's inability to solve the fiscal cliff gridlock. Meanwhile Europe has officially fallen back into recession again. Geopolitical tensions are rising with war is brewing in the Middle East. Israel is marshalling ground troops in response to Hamas firing hundreds of rockets into Israel in the past week. Yet in spite of all the negative headlines the sellers might be exhausted. The stock market's intraday bounce on Friday could be a short-term bottom.

The stock market's focus remains the fast approaching fiscal cliff on January 1st, 2013. Both democrat and republican leaders met on Friday and in a post-meeting statement to the press they tried to offer a positive spin that the two parties will find some mutual ground to come together and solve this before it's too late. No one offer any real details nor did they agree on a time frame for when this deal would be reached. Yet just the promise that something would be done seemed enough to spark a little short covering on Friday. It is more likely that after a multi-week decline it was time for bears to do a little profit taking ahead of the weekend.

In economic news the headlines were mixed. The number of applications for new mortgages and mortgage refinancings rose +11% and +13.1%, respectively. These are four-week highs for mortgage applications and suggest some strength in the real estate market even though this is normally a slower season for home sales. The PPI for October dropped -0.2% which was better than expected. The New York Empire State manufacturing survey for November came in at -5.2, which was an improvement from last month's -6.2 but still in negative territory. The Philly Fed survey plunged to -10.7 when economists had been expecting an improvement to 0.0 from October's -1.9. Weekly initial jobless claims also surged well past estimates. Yet the government is blaming Hurricane Sandy for the declines in the New York fed, Philly Fed, and jobless claims.

Headlines from Europe continue to plague investor confidence. The Eurozone has officially fallen into its second recession since 2009. The latest data showed the region's GDP fell -0.1% in the third quarter. That followed the -0.2% decline in the second quarter. France and Germany are the Eurozone's two largest and some of their strongest economies yet both countries only managed a +0.2% growth rate in the third quarter and together they were unable to keep the Eurozone region in positive territory. That's not too surprising. They would be hard pressed to keep the 17-nation Eurozone afloat. Much of the southern region is sinking with Spain and Italy slowing and Greece crashing. There have been warning signs that Germany's economy was finally starting to get bogged down in the mess with exports falling and businesses cutting back and confidence numbers sliding.

Major Indices:

Last week I cautioned readers to look for the S&P 500 to dip toward the 1350 level as potential support. By Thursday the index was bouncing along the 1348 level. It looked like it might bounce from there but instead the index spiked down to 1343 on Friday morning and then reversed higher.

As you can see from the chart below the S&P 500 has completed a 61.8% Fibonacci retracement of the June-September rally. It's also see a -9% pullback from its Summer highs. Is the correction finally over? That I can't say but it does look like the S&P 500 index is poised to bounce. Friday definitely looks like a one-day bullish reversal pattern. I would not be surprised to see a bounce back toward the 1380 level and possibly higher. My worry is that without a solution to the fiscal cliff issue is that this bounce will fail and eventually produce a new lower high.

chart of the S&P 500 index:

The NASDAQ continues to underperform. The NASDAQ composite gave up -1.7% for the week and posted its sixth weekly decline in a row. It's down seven out of the last eight weeks. Friday's low was 2810 making it a -12% correction from the September highs.

Friday's intraday bounce looks like a bullish reversal but we'll have to see if there is any follow through. The index is definitely oversold at these levels. We could easily see the NASDAQ rebound back into the 2900-2950 zone but I suspect the 2950-3000 area might be tough resistance.

I am not claiming we are in a bear market but I would expect the bounce to act like a bear-market rally, which will probably short and fast only to fail at resistance.

Should the 2800 level fail then the next likely support area is the 2750-2725 zone.

chart of the NASDAQ Composite index:

The small cap Russell 2000 index was one of the worst performers of the week with a -2.3% drop. Coincidentally the $RUT's low on Friday also marked a -12% correction from its September high. Technically Friday's intraday bounce has created a bullish engulfing candlestick bullish reversal pattern. It is also a bounce from trend line support I've had on my weekly chart for months. If we're lucky we will see the $RUT bounce back toward broken support and likely resistance at the 800 level, maybe higher, but not likely to rally past 820.

Daily chart of the Russell 2000 index

Weekly chart of the Russell 2000 index

The fiscal cliff remains the market's main worry but after government leaders met in Washington and promised to cooperate on Friday we might see concerns postponed for a few days. Thankfully investors and consumers are likely to be distracted by the upcoming Thanksgiving holiday and "black Friday" sales.

There is not much on the calendar this week. If I had to pick one report to watch it might be the Chinese PMI data on Wednesday. Trading volumes are going to dwindle lower and lower each day. The markets are closed on Thursday and will only be open half a day on Friday.

Economic and Event Calendar

- Monday, November 19 -
existing home sales

- Tuesday, November 20 -
housing starts
building permits
Eurozone PPI
German PPI

- Wednesday, November 21 -
Weekly Initial Jobless Claims
University of Michigan Consumer Sentiment Survey
Chinese manufacturing PMI

- Thursday, November 22 -
U.S. markets closed for Thanksgiving holiday
Eurozone PMI
Eurozone consumer confidence

- Friday, November 23 -
U.S. markets close early on Friday
German GDP report

Additional Events to be aware of:

Dec. 12th - FOMC meeting

The Week Ahead:

Looking ahead the Thanksgiving week is traditionally a bullish one for stocks but that's not a guarantee. Although this week timing will work in the bulls' favor. Stocks are oversold and poised to bounce so history will likely be repeated with an up market. I want to warn you again that without a solution for the fiscal cliff that any market bounce is probably just another opportunity for bearish trades. While I expect stocks to move higher the next few days, when market participants return to work on Monday, Nov. 26th, they could be looking to sell the rally. The exception might be retail stocks that could see a rally if data from "black Friday" and the weekend suggest consumers are opening their wallets again.

I am concerned that fighting in the Middle East could negatively impact investor sentiment. In the last several days Hamas has launched hundreds and hundreds of rockets into Israel, mostly at civilian targets. Fortunately, some of Israel's major cities have intercept weapon systems that can shoot down incoming rockets. That has not stopped Israel from marshalling 75,000 ground forces for action. Currently Hamas is the legal ruling political party for Palestine even though many consider them a terrorist organization who refuses to recognize Israel's right to exist. Personally, I don't think there will ever be peace in the Middle East but from an investor perspective, the idea of massing troops and retaliatory strikes back and forth across the borders of Israel and Palestine are never a good sign. If another neighboring country decides to get involved it could turn ugly real quick. However, as long as this remains an Israeli-Palestinian conflict the impact on the U.S. stock market will likely be mild.

Let's not forget that some of the issues we still face between now and the end of the year are gridlock in Washington over the fiscal cliff, investor temptation to sell stocks now to avoid higher taxes in 2013, and another fight in Washington over the U.S. debt ceiling again. Plus we have Europe slowing down. China seems to be slowing down. Spain could be on the verge of asking for a bailout. Syria remains at civil war. Iran is only months away from having enough enriched uranium for a nuclear warhead. Odds are that the Iran issue will come to the forefront again in the first half of 2013 and that will definitely have an effect on crude oil prices.

On that happy note hug your friends and family and enjoy your Thanksgiving Holiday. We have much to be thankful for!

James


Portfolio

Portfolio Update

by James Brown

Click here to email James Brown


Current Portfolio


Portfolio Comments:

Stocks continue to sink with the S&P 500 index down four out of the last six weeks and the NASDAQ down six weeks in a row. It would seem that equities may have finally hit oversold levels as traders bought the dip (or started to cover shorts) midday on Friday.

Odds are good the market could see a rebound during Thanksgiving week.

COF, JOY, PFE, and USB were stopped out this past week.

GE has graduated from the watch list to the play list.

No stop loss changes tonight.

Disclaimer: At any given time the author may have positions in any or all of any companies mentioned in the Leaps Newsletter.

--Position Summary Table--
Table lists Directional CALL or PUT/LEAPS only.
Insurance puts, if applicable, are not shown.

Red symbol/name represents a play or option position exited or closed this week.




New Plays

Updating the Radar Screen

by James Brown

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Editor's Note:

(November 17, 2012)

I am not adding new trades tonight. The market is likely to be treacherous between now and yearend. Until Washington finds a solution for the fiscal cliff I fear that any market rally will be used as another opportunity for bearish trades. There are still opportunities in the market but they are fewer and farther apart.

Our two new watch list candidates in tonight's newsletters happen to look pretty strong and have been relatively unaffected by the market's November correction. There is a good chance that both of them could be triggered this week if the market bounces.

Nimble traders may want to check out GGC on our radar screen below. The stock looks ready to breakout. I am concerned with the extremely wide option spreads. The LEAPS on GGC are currently too wide to trade but you might be successful with a shorter-term trade.

Radar Screen:
Here is a list of stocks on my radar screen. These have potential to be LEAPS trades down the road if the right entry point presents itself:

HD, HFC, VMC, APKT, GGC, JBHT, CLB, CVLT, TJX, M, AAPL, LSTR,


Play Updates

Another Down Week

by James Brown

Click here to email James Brown

Editor's Note:

The U.S. market continues to sink but many stocks and the major indices have reached oversold levels. It looks like equities are due for a bounce.

GE has joined the active trade list.


Closed Plays


COF, JOY, PFE and USB were stopped out.


Play Updates


American Intl. Group - AIG - close: 32.17

Comments:
11/17/12: The correction in AIG is now four weeks old, five if you count the reversal in mid October. The stock broke down under its 200-dma this past week but managed to reclaim it with Friday's bounce. It looks like AIG may have found a short-term bottom but we need to see some confirmation and I am not suggesting new positions at this time. Right now our stop loss is at $29.45. More conservative traders may want to up that toward this past week's low (30.64).

Earlier Comments:
Our plan was to keep our initial position size small to limit our risk. We want to exit our 2013 calls when AIG hits $39.00. We will plan on exiting our 2014 calls when shares hit $42.50.

- Suggested Positions - (small positions @ first)
May 18, 2012 - entry price on AIG @ 28.25, option @ 3.40
symbol: AIG1319A30 2013 JAN $30 call - current bid/ask $ 2.71/ 2.77

- or -

May 18, 2012 - entry price on AIG @ 28.25, option @ 4.20
symbol: AIG1418A35 2014 JAN $35 call - current bid/ask $ 3.50/ 3.60

11/02/12 AIG gapped down following its earnings report
10/06/12 adjusting our exit targets. Plan on exiting our 2013 calls when AIG hits $39.00. We'll exit our 2014 calls when AIG hits $42.50
09/08/12 Treasury has announced an $18 billion sale of AIG stock
08/18/12 new stop loss @ 29.45
06/16/12 new stop loss @ 26.95
05/18/12 triggered at $28.25
05/05/12 The U.S. government is planning to sell 164 million shares at $30.50 and AIG will probably gap down on this news.
Move the trigger down to $28.25, and move the stop loss to $25.75.
04/28/12 adjust buy-the-dip trigger to $30.00 and stop to $27.40

Current Target:$ 39.00
Current Stop loss: 29.45
Play Entered on: 05/18/12
Originally listed on the Watch List: 04/07/12


Bank of America - BAC - close: 9.12

Comments:
11/17/12: BAC shot lower on the 14th and broke down under its 50-dma. Yet there hasn't been much follow through. Shares are currently bouncing in the $8.90-9.00 area. That doesn't mean the failure at $10 and the two-week reversal doesn't look bad. It does look bad and BAC might be headed for the next level of support near $8.50 and its 200-dma. If that occurs it would probably be the death of our 2013 January calls. More conservative traders may want to abandon ship or apply a stop loss under last week's low. I am not suggesting new positions at this time.

Earlier Comments:
Currently we do not have a specific exit target. The plan has been to exit in the $12.00-15.00 zone.

- Suggested Positions -

AUG 29, 2011 - entry price on BAC @ 8.10, option @ 1.50
symbol: BAC1319A10 2013 JAN $10 call - current bid/ask $ 0.20/ 0.21
(No stop loss on this position)

(2nd Position, bought the dip at $5.15)

NOV 23, 2011 - entry price on BAC @ 5.15, option @ 0.35
symbol: BAC1319A10 2013 JAN $10 call - current bid/ask $ 0.20/ 0.21
(no stop loss on this position)

11/10/12 no new positions at this time.
09/08/12 BAC is breaking out. Consider buying 2014 calls on a dip near the $8.50-8.40 area
07/21/12 BAC reported earnings this past week and investors have decided to sell the news. The stock looks vulnerable here and readers may want to exit early!
05/19/12 BAC has pulled back to the 61.8% retracement
03/17/12 BAC has broken out from its multi-week trading range. Broken resistance near $8.30 should be new support.
...look for earlier comments in prior updates...

Current Target: $12.00-to-$15.00
Current Stop loss: see details above
Play Entered on: 08/29/11
Originally listed in the New Plays 08/27/11


CONSOL Energy Inc. - CNX - close: 31.75

Comments:
11/17/12: The correction lower in CNX continues. I warned readers a week ago that we'd probably see CNX retest the $32 area again. Shares surpassed that with a spike down to $30.42 on Friday morning. Friday's intraday reversal is encouraging but it needs to see follow through. Given our stop loss at $29.75 I would be somewhat tempted to consider new positions here but the better choice is probably to wait. Given the uncertainty in the market over the fiscal cliff the next few weeks could be volatile.

Earlier Comments:
We want to keep our position size small. Our long-term target is $42.50. The Point & Figure chart for CNX is bullish with a long-term $47 target.

- Suggested Positions - (small positions)
NOV 09, 2012 - entry price on CNX @ 32.50, option @ 3.24
symbol: CNX1418a40 2014 JAN $40 call - current bid/ask $ 2.62/ 2.73

11/09/12 triggered on a dip at $32.50
11/03/12 adjust the trigger down to $32.50, stop to $29.75
10/27/12 adjust the trigger down to $33.00

Current Target: $42.50
Current Stop loss: 29.75
Play Entered on: 11/09/12
Originally listed on the Watch List: 10/13/12


Cree, Inc. - CREE - close: 29.94

Comments:
11/17/12: I cautioned readers to expect a dip back toward $30 or $29. Sadly the semiconductor sector was one of the market's worst performers last week. CREE started to pullback on Wednesday and the close under $30.00 is technically bearish. Investors will also want to be aware that this past week's pullback has created a bearish engulfing candlestick reversal pattern on the weekly chart. If CREE doesn't bounce soon odds are rising we will see it pullback to the next support level near $28 and its 50-dma and 200-dma. I would hesitate to launch new positions at this time.

- Suggested Positions - (small positions)
NOV 01, 2012 - entry price on CREE @ 29.85, option @ 3.80
symbol:CREE1418a35 2014 JAN $35 call - current bid/ask $ 3.50/ 3.70

Current Target:$ 39.00
Current Stop loss: 27.45
Play Entered on: 11/01/12
Originally listed on the Watch List: 10/20/12


Discover Financial - DFS - close: 39.46

Comments:
11/17/12: DFS was holding up just fine until Wednesday. It was Wednesday when the whole market accelerated lower and suddenly traders started taking profits in DFS. Shares have broken below their 50-dma but the bounce near $38 and its 100-dma, right where we expected it to. Friday's rebound is just a short-term oversold bounce from the sharp two-day decline and now $40.00 is new short-term resistance again. More conservative traders might want to consider taking profits now. I am not suggesting new positions at this time.

We still have the 2014 calls and we're aiming for $44.00.

- Suggested Positions -
(Closed on Sept. 27th)
JUL 05, 2012 - entry price on DFS @ 35.28, option @ 2.15
symbol: DFS1319A37 2013 JAN $37 call - exit $3.70 (+72.0%)

- or -

JUL 05, 2012 - entry price on DFS @ 35.28, option @ 3.40
symbol: DFS1418A40 2014 JAN $40 call - current bid/ask $4.60/4.90

11/03/12 new stop loss @ 36.45
09/29/12 new stop loss @ 35.75
09/27/12 hits our $39.75 target to exit 2013 calls (option @ $3.70)
09/27/12 DFS beats Wall Street's earnings estimates
09/22/12 more conservative traders may want to exit right now or before DFS reports earnings on Sep 27th.
08/25/12 new stop loss @ 34.75
08/25/12 adjusted targets to $39.75 (2013 calls), $44 (2014 calls)
08/18/12 new stop loss @ 33.45
...see prior updates for early comments.

Current Target: $39.75 for the 2013 call2, $44.00 for the 2014s
Current Stop loss: 36.45
Play Entered on: 07/05/12
Originally listed on the Watch List: 06/02/12


Family Dollar Stores - FDO - close: 66.54

Comments:
11/17/12: Believe it or not but FDO actually closed up for the week. That's not saying much when you look at FDO's recent action. Shares have been churning sideways on either side of $66 for days now. Traders seem to be buying dips near the rising 50-dma at the moment. The fact that FDO has been able to maintain the bullish trend of higher lows is definitely encouraging. Readers may want to wait for a close over $67.00 before considering new bullish positions.

- Suggested Positions -
OCT 12, 2012 - entry price on FDO @ 65.88, option @ 1.70
symbol: FDO1320d75 2013 APR $75 call - current bid/ask $1.15/1.35

10/20/12 adjust stop loss to $62.95

Current Target: $74.50
Current Stop loss: 62.95
Play Entered on: 10/12/12
Originally listed on the Watch List: 10/06/12


General Electric - GE - close: 20.15

Comments:
11/17/12: GE is a watch list candidate that hit our entry point this past week. The plan was to buy calls on a dip at $20.25. When the market plunged on Wednesday shares of GE dropped to $19.95 before settling at round-number, psychological support at $20.00. Since then GE has been holding this support level but it remains under its broken 200-dma. Readers may want to wait for GE to close back above the 200-dma (currently 20.25) before launching new bullish positions.

- Suggested Positions -
NOV 14, 2012 - entry price on GE @ 20.25, option @ 0.42
symbol: GE1418a25 2014 JAN $25 call - current bid/ask $0.39/0.43

11/14/12 triggered at $20.25
11/10/12 adjust the trigger down to $20.25, just above the 200-dma, stop to $19.25
10/27/12 move the buy-the-dip trigger down to $20.50
10/20/12 adjust the buy-the-dip trigger to $21.00 and our stop to $19.45

Chart of GE:

Current Target: $27.50
Current Stop loss: 19.25
Play Entered on: 11/14/12
Originally listed on the Watch List: 09/22/12


Lennar Corp. - LEN - close: 36.13

Comments:
11/17/12: Whew! That was a close one. LEN almost hit our stop loss on Thursday with a dip to $33.92. The recent sell-off broke through one of LEN's bullish trend lines of support but the last three days have created a bullish reversal pattern. Now LEN just needs to rally back above the 50-dma and we can breathe a little easier.

I am not suggesting new positions at this time. Our stop remains at $33.90.

Earlier Comments:
I do think the $40.00 level is likely resistance and LEN will probably see a pullback on its initial test of $40.00. Keep in mind that we also have more than a year for our 2014 calls to work.

- Suggested Positions -
(target for 2013 calls was hit at $36.00 on 09/14/2012)
AUG 17, 2012 - entry price on LEN @ 32.72, option @ 2.07
symbol: LEN1319A35 2013 JAN $35 call - exit $3.70 (+78.7%)

- or -

AUG 17, 2012 - entry price on LEN @ 32.72, option @ 3.39
symbol: LEN1418A40 2014 JAN $40 call - current bid/ask $4.70/4.90

10/20/12 new stop loss @ 33.90, adjust exit target on 2014 calls to $44.00
09/24/12 LEN reported earnings, investors sell the news
09/22/12 new stop loss @ 33.40
09/15/12 new stop loss @ 31.40
09/14/12 2013 call target hit at $36.00, option @ 3.70 (+78.7%)
...

Current Target: $ 36.00(2013 calls), $44.00 (2014 call)
Current Stop loss: 33.90
Play Entered on: 08/17/12
Originally listed on the Watch List: 08/11/12


L-3 Communications - LLL - close: 73.97

Comments:
11/17/12: We had a close call with LLL. Shares broke down under their 50-dma this past week. The stock also dipped to short-term support near $72.00. The intraday low on Friday was $71.91. Our stop loss is at $71.85. The big rebound on Friday is encouraging but I would not launch new positions here. A close back above $75.00 would improve things and might be considered a new bullish entry point.

- Suggested Positions - (small positions)
NOV 05, 2012 - entry price on LLL @ 75.64, option @ 4.40
symbol: LLL1418a80 2014 JAN $80 call - current bid/ask $ 3.80/ 4.10

Current Target:$ 85.00
Current Stop loss: 71.85
Play Entered on: 11/05/12
Originally listed on the Watch List: 10/20/12


Southern Copper Corp - SCCO - close: 33.67

Comments:
11/17/12: SCCO gave up another dollar last week yet the downward momentum is slowing. The stock has reached oversold levels and shares are now up two days in a row. I am not suggesting new positions at this moment. Readers might want to consider raising their stop loss to $32.40, just under the 200-dma, or closer to $33.00 instead.

The plan was to keep our position size small to start.

- Suggested *SMALL* Positions -
NOV 06, 2012 - entry price on SCCO @ 35.78, option @ 2.30
symbol:SCCO1418a40 2014 JAN $40 call - current bid/ask $ 1.20/ 1.60

11/06/12 trade opened on gap down at $35.78, below our trigger.
(gap down was due to SCCO trading ex-dividend)

Current Target: $44.75
Current Stop loss: 31.95
Play Entered on: 11/06/12
Originally listed on the Watch List: 10/20/12


SIRIUS XM Radio - SIRI - close: 2.69

Comments:
11/17/12: SIRI saw some volatility this past week with an intraday dip below support near $2.60. That may have been due to news that its Canadian business might suffer due to the NHL lockout as customers cancel subscriptions due to missing games. Fortunately the stock recovered relatively well on Friday but I am not suggesting new positions at this time.

- Suggested Positions -
OCT 04, 2012 - entry price on SIRI @ 2.75, option @ 0.38
symbol:SIRI1418A3 2014 JAN $3.00 call - current bid/ask $ 0.38/ 0.42

- or -

Buy the Stock: Entry @ $2.75 on Oct. 4th, 2012

11/03/12 new stop loss @ 2.45
10/20/12 warning! SIRI is up five weeks in a row and growing overbought. The stock could see a sell-off on its earnings report

Current Target: $ 3.90
Current Stop loss: 2.45
Play Entered on: 10/04/12
Originally listed on the Watch List: 09/29/12


Visa, Inc. - V - close: 142.71

Comments:
11/17/12: Visa continues to weather the market's storm pretty well. The stock has been consolidating in a bull-flag like pattern, minus the flag pole. Traders bought the dip on Thursday and V outperformed on Friday with a +1.9% gain.

I am encouraged by the stock's performance. More aggressive traders may want to raise their exit target given how much time we have left on the 2014 calls. Currently we are aiming for $149.00.

- Suggested Positions -
(Closed the 2013 calls on Oct. 22nd at the open)
JUL 03, 2012 - entry price on V @ 126.49, option @ 5.85
symbol: V1319A135 2013 JAN $135 call - exit @ $7.95 (+35.8%)

- or -

JUL 03, 2012 - entry price on V @ 126.49, option @ 11.95
symbol: V1418A140 2014 JAN $140 call - current bid/ask $16.75/17.15

11/03/12 New stop loss @ 134.00
10/31/12 Visa delivers a bullish earnings report
10/22/12 closed 2013 Jan call at the open
10/20/12 prepare to exit our 2013 calls at the open on Monday
10/13/12 readers may want to take profits early if you're holding the 2013 calls.
10/06/12 new stop loss @ 129.00
08/06/12 new stop loss @ 119.75
07/16/12 V pops on news of a settlement in 7-year lawsuit
07/03/12 trade opens with Visa at $126.49
07/02/12 Visa closes above our trigger @ 125.50

Current Target: $149.00
Current Stop loss: 134.00
Play Entered on: 07/03/12
Originally listed on the Watch List: 06/30/12


CLOSED Plays


Capital One Financial Corp. - COF - close: 55.70

Comments:
11/17/12: Ouch! It's been a very painful two weeks for COF. The stock was trading near new multi-year highs on Friday Nov. 2nd just under $62. Since then it's been almost straight down. COF came to rest of technical support at its simple 200-dma this Friday. Our stop loss had already been hit at $56.85.

Earlier Comments:
COF can be somewhat volatile so we want to keep our position size small.

- Suggested Positions - (small positions)
OCT 22, 2012 - entry price on COF @ 61.14, option @ 5.65
symbol: COF1418a65 2014 JAN $65 call - exit @ 3.80 (-32.7%)

11/14/12 stopped out at $56.85

Chart of COF:

Current Target:$ 74.00
Current Stop loss: 56.85
Play Entered on: 10/22/12
Originally listed on the Watch List: 10/06/12


Joy Global, Inc - JOY - close: 54.88

Comments:
11/17/12: JOY has seen a dramatic two-week reversal from its failed rally near the simple 200-dma in early November. The market's widespread post-election sell-off has only exacerbated the selling. JOY broke through support near $60, near its 50-dma, near its 100-dma and the $55 level. When the whole market accelerated lower on Wednesday, Nov. 14th shares of JOY hit our stop at $55.75.

- Suggested Positions -
SEP 25, 2012 - entry price on JOY @ 57.50, option @ 7.50
symbol: JOY1418A70 2014 JAN $70 call - exit $5.70 (-24.0%)

11/14/12 stopped out at $55.75
11/03/12 new stop loss @ 55.75
10/26/12 JOY seeing volatility on rumors it is a takeover target
09/25/12 triggered on a dip at $57.50
09/22/12 adjust entry to buy a dip at $57.50, stop to $53.90

Chart of JOY:

Current Target: $78.50
Current Stop loss: 55.75
Play Entered on: 09/25/12
Originally listed on the Watch List: 09/15/12


Pfizer Inc. - PFE - close: 23.86

Comments:
11/17/12: Shares of PFE have been threatening us with a breakdown under support near $24.00 and its 100-dma for days. Shares finally hit our stop loss at $23.90 on Nov 13th.

- Suggested Positions -
Jul 18, 2012 - entry price on PFE @ 23.53, option @ 1.30
symbol: PFE1418A25 2014 JAN $25 call - exit @ $1.26 (-3.0%)

11/13/12 stopped out at $23.90
11/01/12 PFE reported earnings
10/20/12 new stop loss @ 23.90
10/06/12 new stop loss @ 23.40
09/29/12 new stop loss @ 22.75
09/22/12 new stop loss @ 22.45
09/08/12 new stop loss @ 21.90
08/06/12 new stop loss @ 21.35
07/18/12 trade opens. PFE @ 23.53
07/17/12 PFE meets our entry requirements (close over $23.40)
06/23/12 removed the 2013 call. We'll only play the 2014s
04/28/12 do not launch positions prior to the earnings report on May 1st.

Chart of pfe:

Current Target: $28.00
Current Stop loss: 23.90
Play Entered on: 07/18/12
Originally listed on the Watch List: 04/21/12


U.S. Bancorp - USB - close: 31.55

Comments:
11/17/12: The sell-off in USB continued. Shares broke down through support near $32 and its 200-dma and exponential 200-dma. The stock hit our stop loss at $31.40 on Wednesday when the market produced a widespread plunge lower.

- Suggested Positions -
Jul 20, 2012 - entry price on USB @ 33.62, option @ 1.39
symbol: USB1319A35 2013 JAN $35 call - exit @ $0.10 (-92.8%)

- or -

Jul 20, 2012 - entry price on USB @ 33.62, option @ 3.10
symbol: USB1418A35 2014 JAN $35 call - exit @ $1.45 (-53.2%)

11/14/12 stopped out at $31.40
09/15/12 new stop loss @ 31.40
07/20/12 trade opened Friday morning
07/19/12 USB closes above our trigger <33.50
07/14/12 adjusted strategy: wait for a close over $33.50, stop 29.90
06/30/12 readers might want to consider an alternative entry point
06/23/12 adjust entry trigger to $29.00, stop to 26.40
06/02/12 adjust entry trigger to $28.00

Chart of USB:

Current Target: $39.50
Current Stop loss: 31.40
Play Entered on: 07/20/12
Originally listed on the Watch List: 05/19/12



Watch

Communication & Mobile Phones

by James Brown

Click here to email James Brown


New Watch List Entries

MSI - Motorola Solutions

NOK - Nokia Corp.


Active Watch List Candidates

ADBE - Adobe Systems

FSLR - First Solar Inc.

GLD - Gold ETF

RCL - Royal Caribbean Cruises

SWN - Southwestern Energy

VLO - Valero Energy


Dropped Watch List Entries

GE graduated to the active trade list.



New Watch List Candidates:


Motorola Solutions - MSI - close: 52.89

Company Info

The market has been in a widespread decline. Bullish candidates are getting harder to find. MSI has not been immune to the market weakness but selling pressure has definitely been mild. Shares broke out past major resistance at $52.00 in early November and have since consolidated sideways in the $52-54 zone. More aggressive traders may want to go ahead and buy calls now on Friday's intraday bounce near $52. I am suggesting a more conservative approach. We will wait for MSI to close over $54.00 and then buy calls the next day with a stop loss at $49.75. More conservative traders could put their stop higher, maybe closer to $52.00 instead. Our long-term target is $65.00. Currently the Point & Figure chart is bullish and is forecasting at $70 target.

Breakout trigger: Wait for MSI to close over $54.00 (stop 49.75)

BUY the 2014 Jan $60 call (MSI1418a60) current ask $2.72

Chart of MSI:

Originally listed on the Watch List: 11/17/12


Nokia Corp. - NOK - close: 2.77

Company Info

NOKIA used to be the largest mobile phone maker in the world. Yet missteps navigating the current smartphone craze have let Samsung grow to be the larger phone maker. Believe it or not NOK made the first commercial "smart phone" but that was years and years ago before the term "smartphone" was so ubiquitous. It was eventually eclipsed by RIMM's BlackBerry and then the Apple iPhone and now Google's Android. It seemed that NOK could not get out of its own way as lighter, more nimble competitors stole the limelight. Now after years of stock market declines there is growing potential that NOK's stock has finally found a bottom.

At less than $3.00 a share and close to book value for the company all the bad news may be finally priced in. Currently NOK is consolidating sideways and it is coiling more tightly ready to breakout one way or the other. I am expecting it to break higher.

I am suggesting readers wait for NOK to close above $2.85 and open bullish positions the next morning. If triggered we'll use a stop loss at $2.49. Our long-term target is $4.95 but more aggressive traders may want to aim higher. The stock is cheap enough that I am also listing buying the stock instead of an option as a trade.

Breakout trigger: Wait for a close over $2.85 (stop @ 2.49)

BUY shares of NOK stock

- or -

BUY the 2014 Jan $3.00 call (NOK1418a3) current ask $0.65

Chart of NOK:

Originally listed on the Watch List: 11/17/12


Active Watch List Candidates:



Adobe Systems - ADBE - close: 32.65

Comments:
11/17/12: ADBE fell less than 30 cents for the week. The stock appears to be finding support near its trend of higher lows. Honestly, more aggressive traders may want to consider buying calls now and using a tight stop loss near the $32.00 level. The newsletter is going to stick to our original plan. I am suggesting we wait for ADBE to close over $35.25 and then buy calls the next day. Our long-term target is $44.00.

Breakout trigger: Wait for a close over $35.25 (stop @ 32.25)

BUY the 2014 Jan $40 call (ADBE1418a40)

Originally listed on the Watch List: 11/03/12


First Solar Inc. - FSLR - close: 23.54

Comments:
11/17/12: FSLR rallied up toward resistance near $26.00 early in the week and reversed. Shares are now testing technical support at the 50-dma. I don't see any changes from my prior comments.

I am suggesting we wait for FSLR to close above $26.00 and then buy calls the next morning with a stop loss at $21.90. Our long-term target is $39.75.

Breakout trigger: Wait for a close over $26.00 (stop @ 21.90)

BUY the 2014 Jan $30 call (FSLR1418a30)

Originally listed on the Watch List: 11/10/12


SPDR Gold ETF - GLD - close: 165.88

Comments:
11/17/12: The U.S. dollar continues to inch higher and is now up four weeks in a row. That's putting pressure on gold prices and the GLD faded lower. I am still expecting a correction lower toward $160.00. There is no change from my prior comments.

Plan to exit the 2013 June calls at $174.50. Exit the 2014 calls in the $185-200 range.

Buy-the-Dip trigger: $160.00 (stop loss @ 154.40)

BUY the 2013 Jun $175 call (GLD1322a175)

- or -

BUY the 2014 Jan $200 call (GLD1418a200)

11/03/12 Adjust the entry trigger down to $160.00 and the stop to $154.40
10/27/12 adjust the entry trigger to $162.00 and the stop to $154.90
10/20/12 adjust the buy-the-dip trigger to $163.00, stop to $157.75
adjust the 2013 call from Jan. $175 to June $175
09/15/12 adjust the trigger to $165.50, stop to $159.00.
09/08/12 adjust the buy-the-dip trigger to $164.00 (up from $162)

Originally listed on the Watch List: 09/01/12


Royal Caribbean Cruises - RCL - close: 33.09

Comments:
11/17/12: RCL is slowly pulling back from resistance near $35.00. Right now I am suggesting readers buy calls on a dip at $32.25. You could also wait for a dip to $32.00 or the 50-dma instead. Or as an alternative you could wait for a close over $35.00 as a bullish entry point. Our long-term target is $39.50. More aggressive traders could aim higher. The Point & Figure chart is forecasting at $57 target.

Buy-the-Dip trigger: $32.25 (stop loss @ 29.25)

BUY the 2014 Jan $35 call (RCL1418a35)

Originally listed on the Watch List: 11/03/12


Southwestern Energy - SWN - close: 35.64

Comments:
11/17/12: SWN displayed relative strength this past week. Yet the stock continues to trade inside a neutral pattern of higher lows and lower highs. There is no change from my prior comments. We are waiting for a breakout past resistance.

Earlier Comments:
I am suggesting we wait for SWN to close over $37.00 and then buy calls the next day with a stop loss at $33.40. Our long-term target is $44.00. The Point & Figure chart for SWN is bullish with a long-term $51 target.

Breakout trigger: Wait for a close above $37.00 (stop 33.40)

BUY the 2014 Jan $40 call (SWN1418a40)

Originally listed on the Watch List: 10/13/12


Valero Energy - VLO - close: 29.36

Comments:
11/17/12: It was a relatively quiet week for VLO with shares consolidating sideways under resistance at $30.00. With the market poised to bounce this Thanksgiving week we might see VLO meet our entry point requirement soon.

I am suggesting we wait for VLO to close over $30.60 and then buy calls the next day with a stop loss at $27.75. Our long-term target is $39.75.

Breakout trigger: Wait for a close over $30.60 (stop @ 27.75)

BUY the 2014 Jan $35 call (VLO1418a35)

Originally listed on the Watch List: 11/10/12